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- The HashFlare founders are spared imprisonment after admitting to a $577M Ponzi scheme and are instead sentenced to time served and fines.
- Prosecutors pushed for a 10-year sentence, but Judge Lasnik granted time served due to asset forfeiture and customer withdrawals.
- The DOJ is considering an appeal of the lenient sentence for Potapenko and Turogin, who defrauded 440,000 customers in a Ponzi scheme.
The founders of HashFlare, Sergei Potapenko and Ivan Turogin, have been spared additional prison time through confessing that they were involved in a massive Ponzi scheme worth $577 million. The Seattle Federal Court sentenced the duo to time served after having served 16 months in custody. During the period of supervised release in Estonia, every one of them had to perform 360 hours of community work and pay a fine of $25,000 each.
The Department of Justice declared that the penalty was no longer lenient. Prosecutors had urged a prison sentence of up to 10 years, citing the massive size of the fraud as justification for such a lengthy punishment. In Estonia, Potapenko and Turõgin were apprehended in November 2022 and subsequently extradited to the United States in May 2024. They have entered a plea of guilty to conspiracy to commit wire fraud.
HashFlare Scam Involving $577M Defrauds 440,000 Investors
According to Seattle prosecutors, the case was the largest fraud that they had ever prosecuted. They clarified that HashFlare’s fraudulent mining deceived 440,000 customers. The sales of the HashFlare between 2015 and 2019 have risen above $577 million.
Potapenko and Turogin deceived customers by giving them false dashboards announcing fictional returns. They used the money of new investors to pay those who came before, running a typical Ponzi scheme.
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However, Judge Lasnik incorporated the asset takeover by the founders into the plea bargain in his case. The assets of Potapenko and Turogin worth more than $400 million were confiscated. They also said 390,000 customers who laid out $487 million made subsequent withdrawals of $2.3 billion, which lowered the effect of the scheme.
HashFlare Founders’ Luxury Purchases and Legal Uncertainty
The prosecutors claimed that the founders squandered millions of dollars on luxurious products. They bought Bitcoin, property, and expensive cars and flew on private jets. A typical Ponzi scheme was being operated by them, according to Acting U.S. Attorney Teal Luthy Miller.
Although the ruling has been made, the future of the founders has been confusing. In April, Potapenko and Turõgin were deported as a result of a letter from the Department of Homeland Security that authorized their departure. This contradictory order was raised by their lawyers.
An appeal of the sentence is currently under consideration by the Department of Justice. The case indicates that one of the largest cryptocurrency frauds in history has occurred, which raises questions regarding the legal verdict.
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